Many of us were struck earlier this month by the brash comments of Ryanair CEO, Michael O’Leary, regarding his customers and the extra fees his airline charges for certain behaviors.
If you are not familiar with the story, an English family of five was charged 300 Euro (about $380) for failing to print their boarding passes in advance. When they got to the airport in Spain, they were forced to pay the fees in order to board their flights home. When the mother posted the experience to Facebook, it generated around a half million likes, and the airline’s CEO felt compelled to respond:
“We think Mrs. McLeod should pay 60 euros for being so stupid,” he said. “She wasn’t able to print her boarding card because, as you know, there are no internet cafes in Alicante, no hotels where they could print them out for you, and you couldn’t get to a fax machine so some friend at home can print them and fax them to you… She wrote to me last week asking for compensation and a gesture of goodwill. To which we have replied, politely but firmly, thank you Mrs. McLeod but it was your ****-up.” Time
Eventually, he clarified his statement:
After describing the woman and anyone else who doesn’t print out boarding passes in advance as “idiots,” O’Leary later backtracked slightly, explaining to the Irish Independent, “I was not calling her stupid, but all those passengers are stupid who think we will change our policies or our fees.” Time
As part of an oligopolistic environment such as the airline industry, Ryanair does not have to be concerned with the same competitive pressures that many other companies do. Imagine if the pizza parlor in your neighborhood, tacked on huge fees and called customers who incurred them idiots publicly? How long would they be in business?
The rules are different for oligopolists. In the case of bank customer service, we are often held hostage by switching costs and lack of differentiated alternatives. In the airline industry, air travel has been commoditized and people’s choice of airline is usually dictated by cost, time, and loyalty rewards — not customer service.
The reality is that airlines can become more profitable by charging excessive fees because consumer choice is so limited that the downsides are not that high. (Unless you try to charge soldiers returning from war $200 per bag.)
In the end, what I found most interesting was how Mr. O’Leary views his customers. His comments fed the stereotype that businesses and customers are at war and that businesses are willing to step on their customers if it will create a nickel more in profits.
But the stereotype is not true for most businesses.
Having been involved in a number of businesses throughout my life and studying businesses both big and small, I can tell you that “screwing” the customer is not what drives most businesses. Does it drive some businesses? Yes, I freely concede that; however, that impulse should not be confused with profit-driven motives that are not parasitic in nature.
Are most businesses looking for more ways to be profitable? Of course. Are most looking for ways to get the most out of each transaction? Sure. But those objectives do not necessarily equate to a negative result for the customer.
You can be more profitable by being more efficient. You can maximize transactions by selling customers other products or services that add value to their lives. Businesses can provide value to customers and receive value in return, without trying to squeeze the customer for every possible advantage.
Though they can be viewed as such, profit and people are not inherently antagonistic.
The two can coexist and even thrive together. In competitive industries, I would contend that the two must coexist for firms to survive over the long term.
Stepping on your customers is a bad idea.
Sure, there are companies out there that view their customers as “marks,” objects of a game in which the objective is to take as much as possible and give as little as possible. They consider business a zero-sum game.
When I look at a customer, I see someone to whom I want to provide value, because I know that if I provide them value, they will return it to me in spades over the long term.
To me, that is the best way to maximize the value of the customer over the long term, and besides, it just feels better!
For more about the Ryanair kerfuffle and some interesting points about airline fees, check out the following articles:
When you look at your customers what do you see?
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